Inflation Worries And A Possible Resurgence Of Covid Don’t Look Big Enough Just Yet To Spook Markets

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Inflation Worries And A Possible Resurgence Of Covid Don’t Look Big Enough Just Yet To Spook Markets
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Below is a market commentary from David Jones, Chief Market Strategist at European investment trading platform Capital.com.

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The S&P 500 Hit Fresh All-Time Highs On Wednesday

8 July 2021, London – David Jones, Chief Market Strategist at European investment trading platform Capital.com, said: "As Wednesday saw the England football team entering territory uncharted for the past 55 years, the US stock market was doing the same thing, although on a somewhat less spectacular scale. Wednesday was the ninth day on the trot that the broader S&P 500, an index of the stocks of 500 leading companies in the US economy, hit fresh all-time highs.

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"Anyone who, at any point in history, had bought an S&P tracker and was still holding it on Thursday would have been sitting on a profit. It is said that bull markets climb a wall of worry - investors balance their glee with potential profits with the fear that a crash may only be just around the corner. Just in case stockholders were getting a bit too complacent this time around, Thursday did deliver a sharp sell-off as the US opened.

"Investors have likely had the same nagging worries all year. Is inflation going to end up being more of a problem than central banks think - and will rates have to be raised sooner than expected? Add into the mix the news that Japan has declared a state of emergency and the Tokyo Olympics will be going ahead without any spectators, due to the coronavirus. This may well have rattled some, worried about another resurgence of the pandemic and the corresponding threat on the economic recovery.

The Worries Aren't Big Enough To Spook Markets

"But if history is going to repeat itself, it could be that these worries don't look big enough just yet to spook markets and cause a more sustainable sell-off. After a few hours of trading, stocks in the USA were attracting buyers once.

"It wasn't just the stock market that saw a burst of volatility this week. The price of oil moved ever high as the week started, hitting its best levels, albeit very briefly, since late 2014. The breakdown of talks between OPEC and OPEC+ was the reason for the sell-off - and it is a market many consider overdue for a correction given it has risen seven-fold in 15 months. But like with stocks, traders tend to buy the dips expecting further strength. If oil increases further then surely worries about inflation are only set to increase.

"For now, markets still look to be undeterred  - although that can be a dangerous belief to hold onto indefinitely. Just ask a Bitcoin buyer from April."


About Capital.com

Capital.com is a high-growth investment trading fintech group of companies empowering people to  participate in financial markets through secure, low-friction, innovative platforms that take the complexity out of investing. Its intuitive, award-winning  platform, available on web and app, offers investors a seamless trading experience to over 3400 world-renowned  markets. To help investors trade with confidence, the platform is enabled with robust risk management controls and transparent pricing while its all-in-one Investmate app delivers extensive financial lessons and educational content to support clients in their investment journey.

Capital.com has clients in over 180 countries with offices located in the UK, Gibraltar, Australia, Cyprus and Belarus. In 2020, the platform reported a 700 per cent growth in its client base, making it one of  Europe’s fastest growing investment trading platforms with more than 2 million clients.

Capital Com (UK) Limited is authorised and regulated by the Financial Conduct Authority (FCA). Capital Com SV Investments Limited is Authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC), under license number 319/17.

To find out more, please visit:  www.capital.com

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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